It seems to be that one of the facts about the great depression is that the depression was caused by greed and fear. This is just plain wrong. People seem to think that capitalism is what caused the depression and that is not really correct.

Like the 2008 financial crisis the 1929 great depression shows just how bad too much government regulation in the economic sector really is.

The federal reserve was officially created in 1913 and their first order of business would be to lower interest rates and to make lending easier to get. With all the easy money around people started borrowing it and putting it into things like real estate investments, businesses, and especially stocks.

People where making a killing by borrowing money at low interest rates. Yet at the same time inflation was starting to take off. The federal reserve had noticed that their strategy of trying to make money easier to get was starting to have negative effects on the economy so they decided to increase the interest rates to make the loans harder to get.

However the economy was already widely dependent on “easy money” so when the Federal Reserve stopped it the economy collapsed. The people who saw what was going on started panicking and that caused more panic. This is the real story behind what caused the great depression.

It isn’t a story of how capitalism failed, but rather a story of how the government trying to control the economy failed. There are already plenty of examples of how that doesn’t work as it is. To make capitalism work you’ve got to let it be. To cause a depression you’ve got to interfere with things.